After almost five years under the ownership of China’s Bright Food, Weetabix is a month into life as part of US-based Post Holdings, which acquired the UK breakfast cereal business in July in a deal worth GBP1.4bn (US$1.83bn). Weetabix’s UK and Irish division also has a new managing director, Sally Abbott, previously the group’s global marketing director. Dean Best caught up with Abbott as she gets to grip with running Weetabix’s largest unit under a new owner.
Weetabix is adjusting to life under a new owner, with US group Post Holdings closing its GBP1.4bn (US$1.83bn) takeover of the UK-based breakfast cereal supplier on 3 July.
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Alongside the change in ownership, Weetabix also has a new executive in charge of its operations in the UK and Ireland, with global marketing director Sally Abbott taking the reins of what is the company’s largest division by sales.
Abbott has spent almost nine years at Weetabix, where she first ran the marketing of the company’s brands – Weetabix, Alpen and Oatibix – domestically, before being handed a global remit. Now she has at the head of a unit that includes the UK, the Weetabix group’s biggest market.
When Weetabix was acquired by Chinese state-backed business Bright Food in 2012, both companies had some lofty ambitions, including making inroads in Asia. How well Bright and Weetabix did in carving out a foothold in China has been a matter of debate. However, under Bright Food’s majority ownership, the proportion of the Weetabix group’s sales generated in the UK, rose from 67% to 68%, so there is no question the company’s domestic market still remains critical as it embarks on life under Post’s ownership.
Abbott tells just-food she believes Post wants “stability” at Weetabix’s domestic arm, which has managed to eke out increased market share in a challenging UK breakfast cereal market. “I suppose fundamentally they bought Weetabix because they are impressed by what Weetabix Food Company has delivered. Given I’ve been here for nine years and I’ve spent over 25 years in my career in the food industry, I think they are looking for stability for the management team here. They’re impressed with the management team that they’ve met, and so my role will be to continue to deliver the results that Weetabix Food Company have become known for delivering.”
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By GlobalDataBright Food’s acquisition of its 60% stake in Weetabix was finalised in November 2012. Looking at the accounts for Weetabix’s parent company, Latimer Newco 2, for the year to 29 December 2012, turnover for that period was GBP456.8m, with the company reporting an EBITDA before exceptional items of GBP127m.
Fast-forward to the most recently available figures – covering the year to 2 January 2016 – and turnover was GBP426.9m and EBITDA before exceptional items was GBP120m.
The later accounts described “difficult market conditions” in the UK and the Weetabix group saw its domestic sales fall 2.4%, with a rise in sales from its brands offset by a 12.2% drop in sales from its private-label business in the country. The company’s private-label arm was hit by the end of contracts, pricing pressure and the ongoing movement of consumers from larger supermarket chains – the group’s “traditional” customer base – to the discount operators.
Nevertheless, brands account for the majority of the Weetabix group’s sales in the UK and the company, during that period, saw its branded volumes grow 4.7% on the back of its established cereals and bar range, plus what was, at the time, its newer breakfast-drink business.
There is no doubt the country has been – and continues to be – a challenging place to do business if you market breakfast cereals.
More recent industry data shows some pressure on the group’s core eponymous breakfast cereals but also some solid growth for the overall Weetabix-branded portfolio, which takes in products including, for example, Weetabix Crispy Minis, the Weetabix On The Go drinks and the protein-enhanced Weetabix Protein cereals launched 18 months ago.
IRI figures for the research firm’s “grocery outlets” data set – which covers UK supermarkets, symbol retailers and independent outlets but not the discounters, Ocado and Marks and Spencer – shows sales of Weetabix Breakfast Cereals in the 52 weeks ending 15 July were GBP112.2m, down 2.4% on a year earlier.
Over the same 52-week period, IRI says UK sales of ready-to-eat breakfast cereals through those grocery outlets dropped 1.9% to GBP1.13bn.
However, during that period, sales from the wide Weetabix brand portfolio – including the drinks, the protein-packed cereals and so on – grew 6.3% to GBP188.8m, an impressive performance in a challenging UK food market overall.
Weetabix says the data reflects a decision to adjust its promotional strategy on new products. “Brand performance is very strong in a flat market – we have successfully innovated to remain relevant for changing consumer needs,” Abbott says.
Abbott explains sales of Weetabix-branded products have been helped by the company’s moves to try to meet changing consumer habits when it comes to breakfast, especially a desire for convenience. “There is definitely a skipping behaviour going on, so there are people who, some days of the week, don’t have time for breakfast. I think our breakfast drink is going a long way to meeting some of those needs. Not everybody, sadly, has got the time to take a bowl, fresh milk, spoon, and eat two Weetabix in the morning. So, our job is to try and stay ahead of the consumer to make sure we give them what they need.”
Elsewhere in the portfolio, Alpen is a brand Abbott says is “in pretty good health” and another example of the Weetabix group’s moves to use product development to support its business. “The arrival of granola over the last couple of years has been interesting, so Alpen launched a granola a couple of years ago to catch on the trend of people are looking for healthier breakfast solutions. That’s doing very well for us,” she asserts.
Meanwhile, some much older products in the Alpen range are benefiting from changing consumer habits. “Of course, we have Alpen bars, they’re growing rapidly even though they’ve been established in the marketplace for probably 20 years because people are looking for that on-the-go breakfast solution.”
When Post acquired Weetabix, the US group touted the “revenue synergies” it expected to see from the deal, pointing to the opportunities it sees for selling the companies’ products in each other’s markets – and for, its own portfolio, tapping into the UK “active nutrition” market.
Post’s “active nutrition” brands include PowerBar and Premier Protein food and beverages. The market for active, or sports, nutrition products in the UK is growing (as witnessed by some of the recent M&A activity in the sector there) and Post indicated it now had its eye on the category. “Weetabix gives us access to the growing UK active nutrition market. We think Premier Protein has potential in the UK because it’s already making inroads into the UK separate from Weetabix,” Post CEO Rob Vitale said in April.
Pressed on whether Post and Weetabix had started working on plans to work on the presence of the US group’s brands in the UK, Abbott says: “We will look at that. It’s just not for now. We’ve got plenty of work to get on with. At some point, we’ll have a look both at our brands internationally and some of the Post consumer brands over here in the UK and Europe, but that’s for another day.”
Even if Post does see some opportunity for revenue synergies, given the challenges in the UK breakfast cereal sector, cost savings are central to the returns Weetabix’s new owner wants to see from the transaction. Post estimates it can generate synergies of around GBP20m a year by the third full fiscal year after the deal closes through “benefits of scale, shared administrative services and infrastructure optimisation and rationalisation”.
Abbott says Weetabix’s UK arm will work with its new owner on areas such economies of scale in raw-material purchasing but emphasises the deal will have no impact on the Weetabix workforce or manufacturing footprint in the UK. “We’ll look into all of those opportunities [but] the good news is that there’s no integration plans. So there’s no need for us to be worried about jobs in the UK or factory closures in the UK because they don’t have a business here.”
For now, Abbott says Post’s view of Weetabix is “you keep doing what you’re doing, that’s why we bought you”. She adds: “What’s attracted them to us is what we do already. They’re going to carry on supporting our investment programme and support the established management team to carry on delivering. My job is to keep delivering the business results that Weetabix Food Company has always done, and I think our role in the category is to lead the category into growth. The market category is pretty flat but I think consumers are looking for healthier solutions that are easy to get to. Our job is to bring more people into the world of better breakfasts and we’ve been doing it pretty well so far, so that’s our job to carry on doing that.”
